So, you’ve decided that enough is enough and you want to sell your business. You’re probably thinking of enjoying retirement or pursuing other goals such as starting another venture or becoming a monk. Whatever your motivation is, it’s ultimately your business and your choice.
Regardless, NYC selling a business is no laughing matter, and, before going any further, you should probably consider getting in contact with a competent business broker. Long Island brokers with extensive experience and credibility can point you in the right direction so that you avoid any mistakes in your business selling process. Any blunder in your sale proceedings can potentially plunge you into a downward spiral of financial and emotional havoc.
To help you identify some of these errors, we’ve compiled a list of 4 common mistakes that business owners make when trying to sell their business. Let’s unpack them, one by one:
1. Lack of Preparation
In this context, “preparation” refers to all the actions that must be undertaken prior to a sale.
If you plan to sell your house, you should undergo various preliminary tasks, such as fixing the plumbing, sweeping and scrubbing the floor, dusting, and organizing every corner so that visitors may be left with a good impression and feel enticed to make the purchase.
Likewise, business brokers (Long Island-based or from any other region) would advise their clients to make their businesses attractive to buyers through various means, such as increasing their revenue, expanding their reach, working out their staffing problems, and getting their financial situation and documentation in order. These actions would positively affect the outcome of a business valuation.
2. Reluctance to Getting Business Brokerage
Long Island is a tough place for doing business, and if you managed to jump through all the regulatory hoops and one-up your competition, you definitely know your way around the trade. However, you don’t know absolutely everything (no one does), and you may consequently be unaware of the many facets of a business sale.
Just as you would require a bookkeeper or accountant to keep track of your cash flow or your tax returns, to secure a successful deal you ought to count also on the knowledge and mastery of a good business broker Long Island has a very competitive market for business brokers, and you’re almost guaranteed to find a trustworthy business brokerage firm that you can afford.
3. Too Much Confidence
Confidence in a sale is not unhealthy. Overconfidence, on the other hand, could lead to serious mishaps, such as accepting an offer at a deep discount thinking it’s a fair price.
Just as it’s easy to err on the higher end, there’s also the risk of falling prey to undervaluation. For this reason, it’s crucial to get the assistance of a skilled business broker. Long Island brokers – especially those with a strong financial background – can offer a more level-headed approach to business valuation, keeping you from making an irreversible mistake you could regret for the rest of your life.
4. Confidentiality Breach
Being open about your business sale is almost guaranteed to produce a dent in its productivity and profitability. Staff performance and morale could take a toll, and turnover would also suffer as a result.
Business brokers are trained to prevent information leakage, especially when dealing with prospective buyers. That way, you can rest assured that whatever happens at the negotiating table remains there.Read More
Many household owners would revamp their homes prior to their sale in order to increase the value and generate much higher returns, Businesses are no different in principle, though the methods are a bit more complex and you need to be able to simultaneously tackle many fronts.
How To Increase Your Company’s Value Before Business Valuation New York City
Business valuation is one of the first milestones in the process of selling a business. The results of this valuation, though, hinges upon your ability to boost your venture’s worth before the business agent can move forward to analyzing spreadsheets and financial statements.
You may find these recommendations useful before getting started:
1. CONSULT AN AGENT
A good business broker should be able to assist you in this regard. Business brokers who excel at business valuations NYC and elsewhere ought to be able to provide tips to heighten your profit beforehand so that the fair value of your company increases without having to make up numbers, hence giving you a better return on investment as you seal the deal with the buyer.
2. RECORD ALL YOUR PROFITS
It’s very tempting for many business owners to slide cash into their pockets and elude the taxable event. When you get paid in cash, you may want to record that sale and pay the respective tax, as that will undoubtedly improve your business valuation. NYC is known for being a “fiscal hell”, but we can assure you that you’ll fare better registering all your sales in the long run, as the broker is able to come up with much higher price tags with verifiable data to back it up.
3. Create an improvement plan
It doesn’t work to simply abandon your business operations as you plan on selling. It’s always crucial that you show interest in the outcomes of your company, even at this stage, so that the prospective buyer can envision a smooth operational transition and be more enticed to carry on with the negotiation.
For this purpose, you’d still want to make investments and improvements in the operational side of things to showcase your company’s worth more tangibly.
4. CUT DOWN UNNECESSARY EXPENSES
Buyers do not care about convenience expenses. In fact, they would love to have expenses cut down to only the essentials. You could probably do away with those subscriptions that ultimately don’t add that much value and could become a hindrance down the road.
It’s not a bad thing to boast about your company’s unique perks and features that separates it from the competition. Your broker can take advantage of these perks to boost the business valuation. New York City has a very competitive market and it’s important to be able to stand out from the crowd.
For example, if you own a guitar shop, you could highlight how you may offer some unique sets of strings or a free tutorial/installation job included in every purchase. Even the most trivial difference (such as opening on weekends) can make or break a business valuation (NYC business valuations especially).Read More
Selling a business is not an easy endeavor in the slightest. Business owners who try to avoid the help of professional business brokers in New York City will be essentially handicapped to deal with this cumbersome process.
WHY YOU SHOULDN’T SELL YOUR BUSINESS WITHOUT A BUSINESS BROKER NEW YORK CITY
Below is a list of mistakes that business owners incur when trying to sell their company without the assistance of a business broker New York City:
1. INCORRECT PRICING
Even small business owners could struggle to define a fair value for their business. There will be a natural tendency to over evaluate o underestimate the business because of miscalculations and emotional factors.
When these miscalculations happen, there is a good chance that you’ll scare off prospective buyers, either because they find it suspicious that the business is sold at such a low price, or they feel the seller is asking for too much.
2. INCORRECT MARKETING
Most business owners are not very savvy in the art of selling a business. Unless they find relatives or friends interested in buying, they will ultimately be left with little to no candidates. This is because they lack the tools and connections necessary to draw the attention of investors.
Business owners will likewise tend to get emotional when showing their company. This may not be a very attractive approach to most buyers because, in most instances, they will come to the conclusion that something awry drove the owner to sell and they’d probably want to steer clear from proceeding with the deal.
You’d want a relatively emotionally-neutral third party who is able to showcase the perks and features of your venture without making it seem as if he/she simply wants to get rid of a troubled business (even if that is, indeed, the case).
3. Lack of Confidentiality
When you decide to deal with buyers yourself, you’re sometimes bound to disclose personal data.
Business owners are particularly susceptible to revealing too many details of their personal life and their company to people who might not be very serious about the sale and who may, in turn, reveal them to others who “have a dog in this fight”.
These are the hazards associated with doing a sale without the aid of competent business brokers in New York City. A good business broker is trained to deal with the sale in the most confidential way possible (at times, even your name is not mentioned at all during screening.)
4. Problems Gathering Documentation
Buyers will demand a copious amount of documentation in order to assess the company’s financial status, especially in the context of “due diligence”. Things can get quite tough at this stage, and gathering all the documentation could seem next to impossible.
Among other things, you’d have to make a list of all your current assets, fixed assets, liabilities, debts, and contracts, as well as collect a plethora of financial documents. These tasks can be effectively streamlined thanks to the help of a business broker New York City who understands all the nuances and caveats present in the process of selling a business that corresponds to your industry in the New York area.Read More
Selling a business is commonly compared to selling a house. It’s not exactly the same, while you may see some overlaps between the two actions.
In any case, even when selling a house, the aid of a real estate agent is key to maximizing revenue and ensuring a good deal with the most compliance. Likewise, the help of NYC business brokers should make your business sale more profitable and quicker than going alone.
Should I Sell My Business Without The Help of an NYC Business Broker?
Generally, it’s not advisable to proceed without the assistance of a business broker.
NYC business brokers are not only there to mediate between a seller and an investor. Top business brokers (NYC and elsewhere) escort the potential seller through all the stages of the selling process, from the moment it’s decided that the business should enter the market to the moment that the papers are drafted and signed.
A good representation is essential to a successful trade. A business agent is not just like your regular real estate broker that places a “for sale” sign on the establishment’s window. A competent brokerage firm has an organized database of solvent prospects with whom you may start negotiations.
If you feel you’re not financially able to afford the best business brokerage firm in town, you can still get the aid of small business brokers. NYC is packed with excellent brokerage firms or agents specialized in both big and small businesses alike so that you may obtain support even at a mom-and-pop level.
These are, in a nutshell, all the benefits of hiring a competent NYC business broker.
1. Pricing and Negotiation
Many business owners tend to fall under two extremes: Either they value their ventures way too high due to the emotional investment they made, or they settle for the lowest price to find liquidity.
Buyers, naturally, would love to buy at bargain prices, though, for the most part, they would be wary of businesses that could reasonably be considered extremely undervalued.
Skillful NYC business brokers know how to settle for the right valuation using various technical metrics that can be verifiable to ensure a buyer’s trust. For this purpose, the broker will require that you provide financial statements and other relevant documentation.
They also excel in the art of negotiation. It bears repeating that, on many occasions, business owners negotiate their terms based on raw emotion. The help of a qualified business broker is crucial in order to inject some semblance of objectivity and reason into the negotiating table while trying to maximize your gains within the parameters of current market conditions.
Brokers also ought to have enough experience to manage all the possible setbacks that may arise with closing attorneys and escrow companies during the final phase of the negotiation, as the parties sign the papers.
2. Profiling and Marketing
A good NYC business broker knows how to spot a good investor better than a regular business owner, owing to the experience that the former has in these kinds of operations.
One of the hurdles of selling a business is finding time to keep the business going while doing all the errands related to the sale. With a diligent business broker, the owner doesn’t have to waste precious time dealing with unsuitable buyers.
Moreover, NYC business brokers are knowledgeable about the marketing tools needed to find a qualified buyer and the strategies that must be applied in the business market to secure a great deal in the shortest timeframe. They will additionally assist buyers in preparing their respective letters of intent and offers.
Apart from optimal buyer profiling, a thoroughly trained business broker is capable of drafting a plethora of confidentiality agreement models to suit a given prospective buyer. They know their way around this so that you remain under the radar. Only those with a tangible possibility of buying your business would know what you’re selling.
In many cases, brokers will demand a financial statement from the buyers along with their signature on the agreement paper as a way to guarantee that they will abide by it.
A business broker may be able to take the helm and coordinate with the rest of the support team (consisting of attorneys, lenders, accountants, etc.) as well as outside advisors, all of this in the hopes of making the process much smoother and taking some of the burden off your shoulders.Read More
The process of selling a business involves a lot of hurdles, paperwork, and emotional baggage. After all, it’s not easy to have to let go of your venture after all the hard work and money invested in it. In any case, hiring the help of a business broker in New York City can save you lots of headaches and relieve you from the technical encumbrances, if not from the sentimental ones.
Whenever you sell a business, there are various milestones that need to be set up. Let’s unpack them for further elaboration.
1. ASCERTAINING YOUR EXIT STRATEGY
Whenever you want to leave your trade in good hands while securing a successful transaction, you have to plan your exit strategy. This involves looking for the best selling opportunity, determining your buyer’s ideal profile, considering remaining as a consultant, among many other variables. Looking for the best exit strategy can definitely impact the value of your business as you seal the deal.
2. HIRE A BUSINESS BROKER IN NEW YORK CITY
Some people are wont to do things on their own, without the aid of business brokers. New York (NY) has some of the best business agencies in America. Relying on a good business broker in New York City, a place known for strict regulations in this area, can really boost your selling speed and profitability while ensuring compliance. It’s also great even when a family member is involved, as the broker will manage to “keep it professional” and smooth any rough edges during negotiation.
3 . PERFORM A FINANCIAL REVIEW AND PRICE VALUATION
This is the part where you’ll define the strength of your company. Financial reviews measure gains vs. losses and how profitable is your business in reality. This is no small matter, and most business owners won’t be capable of drawing up all the financial data required without the help of a business agent, who is, by default, equipped with the tools and expertise to give out reliable EBITDA.
The broker, to attain this goal, will require from you some documentation in order to proceed with the fair price valuation, such as tax returns, asset lists, mortgage, leases, and other relevant documentation. It’s crucial that you don’t hide anything from him/her, and that price isn’t set too low or too high in order to be able to sell and not lose money down the road.
4. PLAN YOUR MARKETING
Now that you were able to find a price range for your business, it’s time to make the offering. The initial price is usually the highest within the range in order to allow for some bargaining on the part of the investor and/or other business brokers. New York (NY) brokerage firms usually possess a shortlist or database from which they’ll be capable of choosing potential investors that fit your company’s criteria, but, additionally, they normally post ads in various business marketplaces.
The advertising material consists of a packet that comprises about 30 to 50 pages of relevant content (including a CMI or confidential information memorandum) that the buyer would want to read in order to define whether the business opportunity matches his/her goals and expectations.
Your business broker will assess the financial strength of the candidates before moving on with the submitted letters of intent and the offers presented. Then, after the best offer is picked, comes negotiation.
Negotiation is the trickiest part of the process and having a good business broker in New York City whom you can trust is _KEY_to make sure it goes smooth. Each of the parties usually bring their lawyers at this stage to draft the purchase agreement.
6. WRAP UP
During this final phase, the preliminary agreement is signed and the parties set up a closing date with a window for wiring the funds, particularly when the buyer applies for a loan. When the closing date arrives, if everything goes according to plan, the final contract is signed with the corresponding attachments and the deal is done.Read More
What is so special about “Baby Boomer” business owners? Well, there are a lot of them. It is estimated 52 percent of businesses are owned by people between 50 and 88 years of age. This equates to 9 million businesses in the United States. Put it another way, a business owner is turning 65 every 57 seconds.
So, why is this important? Typical of most business owners, the value of their business amounts to 50 to 75 percent of their net worth (if not more); the remainder in personal real estate and financial investments. Ordinarily, the business owner has only one chance to monetize his or her largest asset through the sale of the business.
It is estimated that 11,000 people are turning 65 years old every day, with this trend continuing for the next 18 years. Being that many of these Baby Boomers are also business owners, one would suspect that every year for the next two decades more and more business owners will be wanting to sell their businesses to cash out and fund their retirements. These businesses amount to some $10 trillion worth of assets.
Yet while more and more businesses go up for sale, the audience of buyers is decreasing. Today, the highest segment of business buyers is the same Baby Boomers in the age range of 55 to 64 years old. The 80 million millennials in the U.S. make up a larger demographic, though their abilities to purchase these businesses are quite low.
Applying the law of supply and demand, there is going to be a growing inventory of businesses for sale each year, while the number of qualified buyers is decreasing each of those years. The law of supply and demand would suggest there will be pricing pressure on these businesses. In addition, overall only 1 out of 4 businesses actually sell after being put on the market; however, the success rate increases to 1 in 3 for businesses with sales of $10 million, and the sale success rate grows to 1 in 2 for businesses with sales greater than $10 million.
The PriceWaterhouseCoopers accounting firm estimates more than 75 percent of business owners have done little planning for their single biggest financial asset. It is sad to say, but business owners spend more time planning their next vacation than planning for their exit into retirement.
Business owners should start the exit planning process today. Serious consideration should be given to creating a timeframe to place the business in the best position to be sold at the highest possible valuation.
Fortunately, the window of opportunity is quite good. Current conditions of rock bottom interest rates, low inflation, historically low capital gain taxes and overall high business valuations make this an ideal time to sell a business. In real estate it is all about “location, location, location,” whereas in business it is all about “timing, timing, timing.” Now is the time to cash in.
Exit planning, however, is a process that requires a significant amount of work. Most important, business owners need to assemble a team of professional advisors to assist them in this process. The team may consist of all or some of these professionals: a business intermediary firm, CPA/accountant, business attorney, financial planner, investment advisor, insurance advisor, valuation specialist, investment banker, banker and business consultant.
Using the analogy of an actual roadmap, this process can be broken down into five exits:
Exit 1: Making the Decision to Sell
Exit 2: Exit Planning Process
Exit 3: Maximizing Business Value
Exit 4: Preparing the Business for Sale
Exit 5: The Deal Process
The actual Planning Process often includes the following seven steps:
1. Identify Exit Objectives
2. Quantify Business & Personal Financial Resources
3. Maximize & Protect Business Value
4. Ownership Transfer to Third Parties
5. Ownership Transfer to Insiders
6. Business Continuity
7. Personal Wealth & Estate Planning
There is no time better than right now to start planning an exit, whether that is tomorrow, next month, next year or the next decade. Just be careful not to miss your EXIT…else you will hear your GPS (or significant other) say, “when possible turnaround” or as my GPS would say, “you idiot, you missed your exit…proceed on this road for another 20 miles.”
This article appeared in the November 2015 edition of Traverse City Business News.Read More